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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

v.

CONSOLIDATED MULTIPLE
LISTING SERVICE, INC.,

Defendant.

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Case No. 3:08-CV-01786-SB

Filed 03/09/2009

UNITED STATES' MEMORANDUM IN OPPOSITION TO
THE CONSOLIDATED MULTIPLE LISTING SERVICE, INC.'SMOTION FOR SUMMARY JUDGMENT

United States v. Terminal Railway Ass'n of St. Louis, 224 U.S. 383 (1912)

Virginia Excelsior Mills v. FTC, 256 F.2d 538 (4th Cir. 1958)

OTHER AUTHORITY

Areeda & Hovenkamp, Antitrust Law, 2220, 2221 & 2223 (Supp. 2008)

I. INTRODUCTION

In its motion, CMLS does not contest that its members ­ virtually all active residential real
estate brokers in the Columbia area ­ agreed to rules that ban innovative forms of competition,
raise barriers to entry for new brokers, and injure consumers by limiting their choices and raising
their commission fees. Instead, CMLS asks the Court to grant it immunity from liability for this
conduct based upon the mere fact that it is a corporation, as reflected on the certificate of
incorporation it offers as the only evidence supporting its motion. CMLS's motion ignores an
enormous body of antitrust law, including Supreme Court cases, applying Section 1 to competitor
associations like CMLS.

In at least nine cases involving multiple listing services (MLSs) like CMLS, courts have
uniformly held that MLS rules governing their broker members are subject to Section 1, and none
of these cases has extended the doctrine of intra-corporate immunity to such rules. Infra 5-6.
Similarly, the Supreme Court has consistently applied Section 1 to associations, standard-setting
organizations and joint ventures formed by competitors, even when such combinations are
incorporated. Infra 6-8. CMLS fails to address, and its argument would effectively overrule, this
long line of cases. Competitors who join forces to restrain competition cannot avoid scrutiny by
using a corporation to carry out their agreement. If so, even a criminal price-fixing cartel could
easily escape Section 1 liability merely by formalizing the structure of its illegal enterprise.

CMLS relies upon two Fourth Circuit cases(1) that apply the doctrine of intra-corporate
immunity established by the Supreme Court in Copperweld Corporation v. Independence Tube
Corporation, 467 U.S. 752 (1984), but CMLS fails to mention or apply the relevant standard from
these cases. Intra-corporate immunity existed in these cases only because they involved "wholly
unilateral" actions by corporate agents who were "not separate economic actors pursuing separate
economic interests, so agreements among them d[id] not suddenly bring together economic power
that was previously pursuing divergent goals." Id. at 768-69; accord Trigon, 367 F.3d at 223;
Oksanen, 945 F.2d at 703. In determining whether "separate economic actors" are involved,
courts "must examine the substance, rather than the form, of the relationship". Oksanen, 945 F.2d
at 703. CMLS has ignored the relevant test announced in Copperweld ­ and applied even in the
cases on which CMLS relies ­ and has elevated form over substance by relying solely on its
certificate of incorporation.

Under the Copperweld standard, intra-corporate immunity does not apply here. CMLS's
rules are an agreement among substantially all of the active competitors in the Columbia area,
who have combined their economic power to enforce restrictions on how they can compete with
each other. This fact distinguishes Copperweld, Trigon and Oksanen, each of which involved
unitary action by a single corporate enterprise and not an agreement among competitors
combining their economic power. Accordingly, the Court should deny CMLS's motion.

CMLS is owned by its approximately 370 members, most of whom are competing real
estate brokers who represent buyers and sellers of homes in the Columbia area. See Answer at ¶ 4
(Docket #6); CMLS Br. at 4 (Docket #35); Ex. A at 75:21-76:1 (Rule 30(b)(6) Dep. of CMLS).
CMLS operates the Columbia area's only MLS, a listing service that maintains a database of
nearly all homes for sale through a broker. Ex. B at 37:7-39:21 (Roe Dep.); Ex. C at 33:5-9,
60:14-61:9 (Baucom Dep.). The CMLS database provides its members with the means to expose
their seller clients' properties to CMLS members and to view the inventory of properties for sale
to assist potential buyers. Ex. D at Art. II, § 2. For this reason, area brokers need to be members
of CMLS to be in business. See Pl.'s Mem. in Supp. of Summ. J. at 5-6 (Docket #38) (citing
evidence that CMLS has market power and controls access to the relevant market). Virtually all
active, Columbia-area brokers who represent buyers and sellers of homes belong to CMLS. Id.

CMLS is controlled by competing brokerage firms. The brokers on CMLS's Board have
the power to admit new members, propose by-laws, and enact rules for members. Ex. D at Art. X,
§ 2 & Rule 5(c). Board members have a duty to represent the interests of all CMLS members.
Ex. E at 66:14-18 (Roe Dep.). In addition, the brokers who comprise CMLS's larger membership
vote on the Board's proposed slate of directors and can approve changes to CMLS's by-laws at
annual meetings. Ex. D at Art. XIII, § 1; Ex. C at 22:20-23:10 (Baucom Dep.). All members of
CMLS must agree in writing to be bound by CMLS's rules. Ex. D at Art. III, § 5; Ex. F at 34:6-14
(Rule 36(b)(6) Dep. of CMLS). Thus, the CMLS rules are agreements among competitors. Ex. F
at 32:21-33:18 (Rule 30(b)(6) Dep. of CMLS); Ex. G at 96:22-97:7 (Ness Dep.).

The broker members of CMLS are separate economic actors operating hundreds of
independent brokerage businesses. CMLS's members "compete fiercely" against each other in the
market for residential real estate brokerage services. Ex. F at 32:21-33:18 & 34:25-35:7 (Rule
30(b)(6) Dep. of CMLS); CMLS's Answer at ¶ 16 (Docket #6); Ex. H at 32:1-19 (Walker Dep.);
Ex. B at 36:14-37:6 (Roe Dep.) (acknowledging that the other members of CMLS are his
brokerage's competitors).

Through the CMLS rules, these brokers agreed among themselves to ban innovative forms
of competition and raise barriers to entry for new competitors. For example, incumbent CMLS
members agreed that none would compete by offering contract terms other than those they had all
agreed to, none would compete by agreeing to perform fewer services in return for a lower fee,
none would compete for customers from lower-cost home offices or from offices outside of the
Columbia-area, and that all new competitors would pay high initiation fees. See Pl.'s Mem. in
Supp. of Summ. J. at 2, 6-17 (Docket #38). These agreements deny consumers the benefits of
competition, resulting in fewer choices and higher fees. Id. at 12-13, 17.

III. ARGUMENT

INTRA-CORPORATE IMMUNITY DOES NOT APPLY TO AGREEMENTS
BETWEEN INDEPENDENT ACTORS COMBINING THEIR ECONOMIC POWER.

CMLS claims immunity from Section 1 of the Sherman Act because the brokers who
formed CMLS chose to incorporate it. The Supreme Court has rejected such a formalistic
approach and held that courts should look to the "reality" and not the "form of an enterprise's
structure." Copperweld, 467 U.S. at 772-73 (antitrust liability should not depend "on the garb in
which a corporate subunit was clothed"); see also Arizona v. Maricopa County Med. Soc'y, 457
U.S. 332, 356 (1982) (nonprofit corporation's rule on maximum price for medical services
constituted "an agreement among hundreds of competing doctors" who comprised it). Permitting
competitors to avoid Section 1 scrutiny simply by incorporating their combination would overturn
decades of Supreme Court precedent and ultimately legalize all agreements that restrain trade,
including criminal price fixing.

The law is clear. A long line of antitrust cases involving MLSs like CMLS establish that
"[t]he concerted action necessary to establish a Section 1 violation exists in the agreement of [the
MLS's] members to adopt and apply [its] rules and membership criteria." United States v. Realty
Multi-List, Inc., 629 F.2d 1351, 1361 n.20 (5th Cir 1980).(3) These cases include this Court's
decision in DuPre v. Columbia Bd. of Realtors, Inc. & The Consol. Multiple Listing Servs. of
Greater Columbia, Inc., Case No. C.A. 78-670-0 (D.S.C. June 2, 1987), in which Judge Perry
held that CMLS violated Section 1 by denying admission to a broker who operated out of his
home.(4) The leading treatise on antitrust law uses MLSs as a classic example of joint ventures
among competitors that warrant heightened antitrust scrutiny. See Areeda & Hovenkamp,
Antitrust Law at 2220, 2221 & 2223 (Supp. 2008). CMLS fails to address these relevant
authorities.

Instead of ending the search for a Section 1 agreement at the certificate of incorporation,
courts look to see whether the defendant operates on behalf of at least two independent economic
actors who have combined their economic power. SeeCopperweld, 467 U.S. at 772-73;
Maricopa County Med. Soc'y, 457 U.S. at 356-57 (organization's rule was an agreement among
its "independent competing entrepreneur[]" members); Virginia Excelsior Mills v. FTC, 256 F.2d
538 (4th Cir. 1958) (finding agreement among the competitors who formed joint venture, where
venture set prices that its independent owners charged for packaging materials); see alsoTexaco,
Inc. v. Dagher, 547 U.S. 1, 5-6 (2006) (holding the two owners of a joint venture could not form
an antitrust agreement because the companies merged and no longer competed against each other
in the relevant market). The Supreme Court has long applied Section 1 to associations,(5) standard
setting organizations,(6) and joint ventures,(7) when they adopt rules affecting how separate economic
actors may compete. The Supreme Court also subjects agreements to Section 1 even where
competitors incorporated their combination as a nonprofit company, as CMLS has done.(8)

Almost one hundred years ago in United States v. Terminal Railway Association of St.
Louis, 224 U.S. 383 (1912), the Court imposed Section 1 liability on fourteen railroads that
created and controlled a single company that operated the only crossings over the Mississippi
River at St. Louis. Id. at 391 & 399-400. Like CMLS, the defendant argued that the company
was a single entity of "common control and ownership" and therefore immune from Section 1. Id.
at 399-400. The Court disagreed, finding that the company was subject to Section 1 because it
was owned and operated by fourteen separate railroads, which jointly controlled admission to, and
use of, the company's facilities. Id. at 399-400, 404-05. Similarly, CMLS's competing brokers
control admission to CMLS and regulate how members may compete and serve customers.

More recently, in California Dental Association v. FTC, the Supreme Court analyzed the
FTC's case against a group of approximately 19,000 competing dentists under Section 1 even
though the dentists registered their corporation as a tax exempt 501(c), noting that the dentists all
agreed as a condition of membership in the organization to abide by its code of ethics. 526 U.S.
756, 759-60, 762 n.3, 779-81 (1999) (remanding case for a more complete rule of reason analysis
under Section 1). CMLS likewise forces its members to agree to and adhere to its bylaws and
rules as a condition of membership. Ex. D at Art. III, § 5.

The Fourth Circuit has also looked beyond corporate structure to apply Section 1 to an
agreement among competitors. In Virginia Excelsior Mills, producers of excelsior created a new
company, owned and governed by the producers, to act as their exclusive sales agent. The owners
continued independent production operations but used their new company to fix the price at which
they sold excelsior. The court refused to find that, merely because the producers formed the new
company to facilitate their price fixing, they were a single entity. 256 F.2d at 540.

In Terminal Railroad, California Dental, and Virginia Excelsior Mills, the courts' inquiry
did not end upon discovering that the defendant was a stand-alone corporation. The courts instead
found that each defendant was subject to Section 1 because it was controlled by competitors who
had agreed to combine their economic power. Accordingly, the Court should not end its inquiry
here with CMLS's certificate of incorporation. As CMLS admits, it is ultimately controlled by its
members ­ horizontal competitors in the residential real estate brokerage market. Def. Br. at 4
(Docket #35) ("[T]he membership controls the by-laws which ultimately control CMLS.").
CMLS's rules are subject to Section 1 because they are "an agreement among competitors on the
way in which they will compete with one another." NCAA v. Bd. of Regents of the Univ. of Okla.,
468 U.S. 85, 99 (1984).

THE CASES RELIED UPON BY CMLS ARE DISTINGUISHABLE BECAUSE THEY
INVOLVE A SINGLE ECONOMIC ACTOR.

The cases cited by CMLS are consistent with the substantial body of law discussed above.
Both Trigon and Oksanen are health care cases involving a single corporate defendant that created
an advisory group of doctors. In both instances, the Fourth Circuit properly applied Copperweld
and considered whether independent economic actors operated in concert and pooled their
economic power. Finding a unitary actor in each instance, the Fourth Circuit concluded that each
defendant's actions were not subject to Section 1.

Oksanen involved a "disgruntled physician" who, upon his suspension from the
defendants' hospital, attempted to "cloak in federal antitrust law what [was] in essence a
workplace dispute." 945 F.2d at 699-701, 711. Pursuant to Copperweld, the Court "examine[d]
the substance, rather than the form, of the relationship between the hospital and the medical staff
during the peer review process" that led to the plaintiff's suspension and found there was no
Section 1 agreement. Because the doctors were simply agents of the hospital, which retained
ultimate authority to act on the recommendation of its advisory peer-review committee, "[t]he
decision to conduct the peer review process does not represent the sudden joining of independent
economic forces that section one is designed to deter and penalize." Id. at 703.(9)

In Trigon, the plaintiff alleged a conspiracy between an insurance company and its
advisory group of doctors to limit insurance coverage for chiropractic services. 367 F.3d at 217-18. The Court again concluded that the doctors who served on the advisory panel were "corporate
agents" of and "lacked the capacity" to conspire with the insurance company. Id. at 225. The
decision of the insurance company to form an advisory panel of doctors did "not bring together
independent economic forces." Id. The insurance company retained ultimate control over the
advisory panel and could ignore, modify, or accept its recommendations. Id. Therefore, the
advisory panel was not independent from the insurance company. Id.

Oksanen and Trigon are inapplicable here. CMLS's rules are an agreement among
hundreds of Columbia-area competitors who have combined their economic power to enforce
restrictions on how they can compete as independent firms in the market for brokerage services.
Supra 2-4. Oksanen and Trigon, by contrast, concern a single corporation's decision about its
own affairs (hospital privileges and insurance coverage, respectively). These unitary actions did
not trigger Section 1 because there was no agreement among competitors about how they would
compete. As discussed above, in finding unitary action the Fourth Circuit emphasized that the
doctors in Oksanen and Trigon had no control over the corporate defendant. Here, CMLS is
controlled by the competing brokers who adopted and approved the CMLS rules. These
incumbent brokers profited from the diminished competition and higher fees that the rules have
produced. Supra 3-4. As the product of concerted action by independent economic actors,
CMLS's rules are an agreement among competitors that unreasonably restrains competition and
are therefore subject to Section 1.

IV. CONCLUSION

For the reasons set forth above, the United States requests that this Court deny CMLS's
motion for summary judgment.

Respectfully submitted,

FOR PLAINTIFF
THE UNITED STATES OF AMERICA

_______________/s/________________
WILLIAM WALTER WILKINS, III
United States Attorney
District of South Carolina

I, Jennifer J. Aldrich, certify that on this 9th day of March, 2009, I caused a copy of
UNITES STATES' MEMORANDUM IN OPPOSITION TO CONSOLIDATED MULTIPLE
LISTING SERVICE INC.'S MOTION FOR SUMMARY JUDGMENT to be served on the
person listed below by ECF.

2. For purposes of CMLS's motion for summary judgment, the evidence submitted by the
United States "is to be believed and all justifiable inferences are to be drawn in [its] favor."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). As used here, "Ex. __" refers to an
exhibit to the Declaration of Owen M. Kendler, filed in support of this memorandum.

4. In disregard of this judgment, CMLS has repeated the same unlawful conduct by
adopting a rule that denies admission to any broker operating out of a home office. This Court's
decision in DuPre is discussed in greater detail in the United States' brief in support of its motion
for summary judgment. Docket #38 at 3, 21-22, 25-26.

5. See, e.g., FTC v. Indiana Fed'n. of Dentists, 476 U.S. 447, 459 (1986) (the defendant's
"policy takes the form of a horizontal agreement among the participating dentists to withhold
from their customers a particular service they desire"); National Soc'y of Prof'l Eng'rs v. United
States, 435 U.S. 679, 682-83 (1978) (characterizing ethical cannon regulating price negotiations
an agreement).

7. See, e.g.,Silver v. New York Stock Exch., 373 U.S. 341, 347 (1963) (describing shut off
of wire connection to plaintiff to be "collective action" by stock exchange and its members);
Associated Press v. United States, 326 U.S. 1, 11-12, 16 (1945) (concluding that joint venture's
bylaws "in and of themselves were contracts" and that "these publishers have, by concerted
agreements, pooled their power").

8. See, e.g., Hydrolevel, 456 U.S. at 576 ("[T]he fact that ASME is a nonprofit
organization does not weaken the force of the antitrust and agency principles that indicate that
ASME should be liable for [plaintiff's] antitrust injuries."); MaricopaCounty Med. Soc'y, 457
U.S. at 339 (Section 1 liability for nonprofit corporation).

9. The court also recognized that, because a "medical staff can be comprised of physicians
with independent and at times competing economic interests," doctors could, under different
circumstances, engage in conduct subject to Section 1. Id. at 706. During the peer review
process, however, the doctors acted as agents of the hospital and not separate economic actors.
Id. at 703. Likewise, there are some instances in which CMLS might act as a single entity not
subject to Section 1. For example, there would likely be no concerted action when CMLS
purchases office supplies. But when its members adopt rules that dictate how brokers can
compete with each other as separate economic actors, Section 1 applies.